Asian Stocks Applaud Shutdown’s End, BOJ Kuroda Sounds Dovish

Talking Points:

• Asian stocks rose sharply into Tuesday’s close
• News that the US Federal Government will reopen gave sentiment a welcome boost
• The Bank of Japan left policy alone, as expected, but Governor Kuroda struck a very dovish note

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Asian stock indexes gained across the board Tuesday after US lawmakers reached a deal to end a Federal Government shutdown. The Bank of Japan kept monetary policy steady, which is to say extremely accommodative, and showed no sign of any inclination to tighten it.

US bourses rose on Monday after the Senate reached a short-term compromise to reopen the government. An interim bill has now been signed into law which will keep Congress in funds until February 8. Asian investors’ sigh of relief was expressed by plenty of green on the screens. The Nikkei ended up 1.3%. It was the clear regional leader but all other indexes managed gains of between 0.5% and 1% as the end of the session loomed.

The US Dollar was steady in Asia against most major rivals, but politics continues to weigh on it. GBP/USD topped $1.40 for the first time since the Brexit vote in 2016. The Japanese Yen gained a little after the Bank of Japan’s decision, but slipped again against the US Dollar as BoJ Governor Haruhiko Kuroda added colour to the background. There was nothing unsurprising about the central bank leaving its policy settings alone, but Kuroda remained extremely dovish about the outlook and that saw the Yen deflate.

Gold prices rose modestly, as they often do when the US Dollar languishes, while crude oil prices managed further gains as investors eyed supply cuts from OPEC nations and Russia.

Still to come Tuesday are UK public finance numbers and the Eurozone consumer-confidence snapshot, but the day’s main economic release will probably be Germany’s ZEW survey. The US Senate is due to hold a confirmation hearing for Marvin Goodfriend. The Carnegie Mellon economics professor has been nominated to the Governing Board of the Federal Reserve.

--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter: @DavidCottleFX